The Dollar fell during much of Tuesday's trading against a number of its major currency pairs, as U.S., European and Japanese equities rallied. This was partially sparked by a sharp increase in German investor confidence, and better than forecast earnings from top U.S. companies such as Target and Home Depot. Demand for the greenback slumped versus a number of major currencies in early trading, as the rally in equities led to a fall in demand for safe-haven assets.
The USD declined against the British Pound by a massive 200 pips to 1.6550. This performance was owed to mounting British inflation. Against the EUR, the USD also saw much bearishness, as the EUR/USD pair slided significantly in early trading. However, this was in some senses short-lived, as U.S. Building Permits and other
weak housing data poured some demand back into the USD. Thus the
USD did make a short recovery, as the EUR/USD cross finished trading at the 1.4128 level. The USD/JPY pair finished even for the day at 94.75, as demand for these low-yielding currencies was lower yesterday.
Looking ahead to today, there is much data that is likely to determine the volatility of the forex market, and the strength of the U.S. Dollar; the most important of these being the publication of U.S. Crude Oil Inventories at 14:30 GMT. A lower figure could help push-up Oil prices, whilst putting downward pressure on the USD. The opposite result could in-turn strengthen the USD. Data from across the Atlantic, such as British CBI Industrial Orders Expectations and the Current Account publication from the Euro-Zone is also likely to have important implications for the USD in Wednesday's trading.